what factors make income statements number different from cashflow's?

Question

I mean the net income/loss number vs net increase/decrease in cash.
Which is more reliable in assessing profitability of a business like a kindergarten?

Thanks.

Answer 1

Assuming the kindergarten uses the accrual basis for accounting, the income statement should be a more reliable indicator of results. It's a cash business and school fees are received at the beginning of the month, so bad debts are rare. The biggest expense should be teachers' salaries, which are paid in cash. But some things like the depreciation of classroom furniture and teaching equipment will not be captured in a cash flow statement, but only in the income statement.